Will Kenyan Bank Stocks Sizzle or Fizzle in 2014?

Bullish

Bank stocks made Nairobi Stock Exchange investors much richer in 2013.

A stable political environment, regional growth, good profits, and a relatively steady interest rate environment kept the bulls running.

But all of that’s in the rear view mirror. What we really want to know is whether these stocks are worth banking on this year. Will their shares pop or drop? Sizzle or fizzle? Jump or slump? Rise or… Well, you get the idea.

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Kenya: A Bonanza for Bank Investors

Photo by DEMOSH

Jan Schalkwijk of Africa Capital Group traveled to Nairobi recently to meet with the management teams of several large Kenyan companies. The following is his take on three of the Nairobi Securities Exchange’s most prominent banks.

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Is KCB Bank Group Kenya’s Choicest Stock?

Kamanda Morara, Ashanti Research

When I asked my friend Kamanda Morara of Ashanti Research for his best Kenyan stock pick for 2013 in mid-December, I had no idea that his choice would bear fruit so quickly.

His tip, KCB Bank Group (KNCB:KN), was trading at a price of KES27.50 at that time. This gave it a dividend yield of 6.7% and a trailing P/E ratio of just 6.5.

Someone must have been eavesdropping on our conversation.

The stock now boasts a price of KES33.50 — a gain of nearly 22% in less than two months.

So, I checked back in with Kamanda last week to congratulate him and to ask whether he felt KCB still had room to run.

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Ranking Kenya’s Most Efficient Banks

Photo by GenVessel

Last week I posted a list of Africa’s 100 largest frontier stocks. You didn’t have to examine the list very closely to see that banks were disproportionately represented. In fact, of the 100 companies, 35 are banks.

So, as Africa investors, we’d do well to develop some skills in analyzing bank stocks.

Today, we’ll start with a basic measure of bank profitability – the efficiency ratio.

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Stock Showdown: Ranking Kenya’s Best Banks

Photo by DEMOSH

So far, we’ve scoped out bank stocks in Nigeria and Ghana, analyzing their profitability, growth, risk, and value to separate the bargains from the bunk.

Now it’s time to turn to Kenya, East Africa’s largest economy. Ten banks call the Nairobi Securities Exchange home. All of them possess different strengths and weaknesses.

Let’s put them through our ranking exercise to help determine which ones merit a more detailed analysis.

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Stock Showdown: Ranking Ghana’s Best Banks

Photo by George Appiah

Last week we crunched the numbers of some Nigerian banks, analyzing their profitability, growth, risk, and value to separate the gems from the junk. I hope you got as much of a kick out of the exercise as I did, because we’re going to do the same thing again today. […]

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Stock Showdown: Ranking Nigeria’s Best Banks

Photo by André Silvestre

If you’ve ever taken a look at the stocks listed on an African market, you likely noticed that they tend to be dominated by banks. Quite often banks are the exchange’s largest, most liquid shares.

It’s for this reason that I spend considerable time coming up with quick and easy ways to evaluate the relative attractiveness of bank stocks.

I walk through my method here.

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Banking the Gold Coast: Investing in Ghana’s Booming Banks

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I believe one of the best ways to tap into Africa’s high-growth economies without exposing yourself to excessive risk is by investing in a well-managed, local bank. African banks’ operations are generally easy to understand. Their balance sheets are refreshingly free of exotic derivatives. For the most part, they simply take in deposits and make loans. It’s banking at its simplest.

Ghana’s banks have enjoyed a purple patch in recent years due to a combination of rapid economic growth and tight fiscal policy. The government expects to post 9.4% economic growth this year thanks to oil revenues – making it one of the fastest-growing economies in the world.

So, which banks are providing the capital for this remarkable expansion? Here is a roundup of the most prominent ones listed on the Ghana Stock Exchange.

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Three Innovative (and Profitable) Kenyan Banks

Photo by WhiteAfrican

This guest post is by Michael Abrahams, General Partner of the New Markets Financial Fund, L.P. While Kenya’s safari and ecotours remain more popular, banking tours may soon catch up. I’ve just returned from a self-guided tour of that country’s banks and came away impressed by the innovation, social impact, […]

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Banking on Africa’s Unbanked

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Michael Abrahams knows banking. Since receiving his PhD in Economics from UC Berkeley, he has helped craft bank policy in Washington, analyzed bank financials on Wall Street, served on the boards of financial institutions, and advised a village-level savings and loan association in Uganda. Now he’s putting his extensive expertise […]

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